Under Colorado law, what corporate actions require a shareholder vote or other type of shareholder approval?
The shareholders of a corporation generally have decision making power over the following corporate actions:
- Annually electing the members of the corporation’s board of directors
- Removal of a member of the corporation’s board of directors
- Amendment or restatement of the Articles of Incorporation of the corporation
- Amending or restating the Bylaws of the corporation (however, many times the Bylaws authorize the board of directors to amend or restate the Bylaws without shareholder approval)
- Merging the corporation with another business entity
- Dissolving the corporation or liquidating the assets of the corporation
- Selling, leasing or exchanging all or a substantial majority of the corporation’s assets
- Approving the conversion to a different type of business entity
- Approving business transactions or business combinations with corporation shareholders that would otherwise be prohibited due to a conflict of interest
- Approving conflict of interest transactions between a member of the corporation’s board of directors and the corporation
Do shareholders have the power to force the corporation’s board of directors to take a certain course of action?
Generally, shareholders of a corporation do not have the power to require the board of directors of a corporation to pursue a particular course of action. However, the shareholders’ power to annually elect the directors gives the shareholders some control over the board of directors and the decisions made by the board. The shareholders also have the power to remove members of the board of directors either with or without ’cause’ giving the shareholders another method to influence or control corporate activities. Typically, the required vote removing a director equals the majority of the outstanding shares of stock of the corporation entitled to vote on the issue pursuant to the corporation’s Articles of Incorporation.
How much liability does a shareholder have for the actions of a corporation?
A shareholder is not generally liable for the actions of the corporation and has limited liability protection for corporate actions. However, there are certain times when a shareholder can be held liable for corporate activities. In such a situation, a shareholder’s liability for corporate actions is generally equal to the amount of their equity investment in the corporation (there are some exceptions). This is because the shareholder has limited ability to control the actions of the corporation. Also, shareholders are not typically involved in management of the corporation on a daily basis unless the corporation is closely-held. Shareholders also have rights to invalidate acts of the corporation that should have been approved by the shareholders but were not submitted to a shareholder vote. For these reason’s a shareholder is usually only liable for corporate actions to the extent of his or her equity investment in the corporation.
For more information see Colorado Revised Statutes – Title 7:
For more information on the duties of majority shareholders to minority shareholders: